Pakistan will increase defence spending by 20% in fiscal year 2025–26. The decision comes after a military clashes with India in April.
According to details, the total federal budget will be reduced by 7%. It will now stand at 17.57 trillion rupees ($62 billion).
The defence allocation will rise to 2.55 trillion rupees ($9 billion). Last year, it was 2.12 trillion rupees.
Military pensions will cost 742 billion rupees ($2.63 billion). Defence spending on equipment will be 704 billion rupees ($2.5 billion). Total defence outlay will be 3.292 trillion rupees ($11.67 billion).
The government projects a fiscal deficit of 3.9% of GDP. It had targeted 5.9% for 2024–25.
Economic growth is expected to rise to 4.2%. Inflation is forecast at 7.5%.
Pakistan increases defence spending: Pakistan-India War
The clashes with India lasted four days. It involved missiles, drones, jets, and artillery by both sides. Pakistan Air Force shot down at least 6 Indian aircraft on May 6-7.
Prime Minister Shehbaz Sharif has said Pakistan must now defeat India economically.
The clash began after an attack in Indian Illegally Occupied Jammu and Kashmir. India blamed Pakistan-without providing any evidence.
In contrast to Pakistan’s defence spending, India’s defence budget is whopping $78.7 billion. It includes $21 billion for weapons. Media reports suggest that India also plans to increase military spending.
Pakistan’s growth this year is 2.7%. The target was 3.6%. Regional growth is stronger. South Asia averaged 5.8% in 2024.
Finance Minister Muhammad Aurangzeb said the economy has stabilised. He has promised reforms to boost exports and increase reserves.
PIA will be privatized as this move is part of the IMF requirements.
The cost of borrowing is falling. Interest rates are being cut. But economists warn that reforms and fiscal limits may slow investment.
Aurangzeb said the budget aims to change the structure of the economy. He wants to reduce crisis risks and build competitiveness.
Some analysts have claimed that the new US tariffs may hurt Pakistan’s exports. The US is Pakistan’s largest market.
